Oregon 30-Hour Real Estate Law Practice Test

What methodologies are used when calculating real market value?

1. Cost of construction added to current market trends

2. Amount a property will sell for, can be financed for, or would be compensated for if destroyed

3. Assessed value set by local government

4. Average price of similar homes in the area

The correct answer is: Amount a property will sell for, can be financed for, or would be compensated for if destroyed

The identification of the correct option as the methodology used when calculating real market value is grounded in the understanding of real estate valuation principles. Real market value is defined as the most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale. This entails considering the dynamics of a property’s potential selling price, the financing conditions available to buyers, and the compensation the owner would receive if the property were to be destroyed. This approach, which focuses on what the property would realistically exchange for under normal market conditions, encompasses a range of factors including current buyer demand, financing options, and potential loss scenarios, making it a comprehensive metric for determining a property's market value. In contrast, the other choices, while relevant to real estate, do not encapsulate the totality of what constitutes real market value. For example, the cost of construction plus market trends doesn't necessarily reflect what buyers are willing to pay or what would occur in a market transaction. The assessed value set by local governments is primarily for taxation purposes and may not accurately reflect current market conditions. Lastly, looking solely at the average price of similar homes could overlook unique factors inherent to the specific property being evaluated, such as location, condition, or unique features. Thus, the